Hi Daniel!
This is going to be a bit tricky from a lending perspective. If this will be a live in flip, that means it will be your primary residence, and DSCR and hard money lenders will not lend on a property that will be your primary residence. The regulations for owner occupied property are federally regulated, including required licensing and disclosures. Non-owner occupied property will be regulated by each individual state. This is such an important detail that lenders can have in their loan docs that if you move in, the loan will be in default. So I will caution you on telling people it is investment property and then moving into it. That is only going to cause more problems than it solves.
You mentioned downpayment and closing costs, what loan programs are you considering. You could potentially do an FHA loan for a property, put down 3.5%, and then do the work as needed on the property while you live there. This has the advantage of being a primary residence with little out of pocket and a 30 year fixed rate loan. If you go to sell the property in a few years, the capital you get out of that transaction should be tax free since it was your primary residence. This would not be the case if it were investment property unless you decided to start a 1031 transaction.
Private money lenders also are equally not likely to lend on a primary residence. Also private lenders are not likely to loan money for the downpayment and rehab costs, as that situation is very problematic for the lender.
I just want to explain from a lender's standpoint why this might be above a lender's risk tolerance, so you can possibly find another alternative. First, when borrowing funds for the downpayment, that means the property is 100% completely leveraged. As the person providing that 2nd lien against the property, if that property loses value for ANY reason (and not all of them you control) that means my loan is automatically underwater being in the 2nd lien behind your financing to acquire the property. If the property values in your market soften, if the tenant moves in and destroys it, fire, earthquakes, floods, hail, hurricane, another lock down requires you to keep a non-paying tenant - honestly anything - and my position in the property is at jeopardy. I'm not saying no one will do this type of loan, but I'm explain why looking at it from a lender's risk perspective could help you look for another alternative.
Another reason, other than being over leveraged, is that a borrower that is not well positioned with capital is also at a much higher risk of default. If a borrower stops paying on that first mortgage, and then the lender goes to foreclose, any equity that might have been had in the property is now gone because default interest, late payment penalties, legal fees, etc will eat up anything left after the principal balance of that first lien is paid. As the 2nd lien holder, again, I'm wiped out entirely. So again not a good place to be. If you close on the property and then discover the roof is leaking, the main sewer line is nothing but tree roots, really any major expense, that can easily put a borrower in a position where they do not have enough actual cash to solve the problem, so the property loses value due to deferred maintenance, or the borrower digs themselves into more debt, making it even harder to get another loan to cash me out of the equation at that upper 20% of equity.
Now what can possibly be done, with the properties you already own. If you have equity in the properties that are getting ready to sell, you could find a private lender that will do a 2nd lien on those, again as long as the equity is there. So for example if you are pretty far along in one rehab, and you have about 50% LTV with your current financing, you could potentially find a lender that will do a 25% LTV second, so your total LTV isn't above 75%. The 2nd lien holder position has a few considerations that need to be in place, such as it can't be a hard money lender, there can't be a large pre-payment penalty, it has to be current, etc. These types of loans I have seen done, and I've personally done a few in my chosen market.
I hope that helps!
